| To: richardred who wrote (2274) | 7/17/2010 2:47:23 PM | | From: richardred | | | | MRX-Oldie
Would-be acquirer Medicis finds itself target of $2.2B Mentor offer.(Medicis Pharmaceutical)(Merry X-Ray acquires SourceOne Healthcare Technologies)(BioVeris in licensing and research agreement with Jewish General Hospital of Montreal)
Medical Device Week
| November 22, 2005 | JOHNSON, HOLLAND | COPYRIGHT 2005 AHC Media LLC. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright
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Would-be acquirer Medicis finds itself target of $2.2B Mentor offer
By HOLLAND JOHNSON
Medical Device Daily Associate Managing Editor
Medicis Pharmaceutical (Scottsdale, Arizona), currently actively seeking to buy breast implant maker Inamed (Santa Barbara, California), found itself over the weekend the target of an acquisition offer by Mentor (Santa Barbara, California).
Mentor's offer to acquire Medicis came less than a week after Medicis was outbid by Allergan (Irvine, California), both companies seeking to acquire Inamed. That competition perhaps emboldened Mentor to make its proposal to acquire Medicis.
In the latest chapter of what is turning into a soap opera whose plot revolves around a scramble to see which company will dominate the lucrative medical aesthetics product market, Mentor proposed a stock-for-stock merger in which Medicis stockholders would receive 0.62 shares of Mentor common stock for each Medicis share.
Based on closing prices on Nov. 18.
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| To: richardred who wrote (2283) | 7/17/2010 3:00:04 PM | | From: richardred | | | | OLDIE
Johnson & Johnson Completes Acquisition of Mentor Corporation
New Brunswick, NJ (January 23, 2009) -- Johnson & Johnson (NYSE: JNJ) today announced the completion of its previously announced acquisition of Mentor Corporation (NYSE: MNT), a leading supplier of medical products for the global aesthetic market. Mentor is expected to operate as a stand-alone business unit reporting through ETHICON, Inc., a Johnson & Johnson company and a leading provider of suture, mesh and other products for a wide range of surgical procedures.
According to Gary Pruden, Company Group Chairman, Johnson & Johnson, with responsibility for the ETHICON Franchise, “Mentor will become the cornerstone of a broader Johnson & Johnson strategy for aesthetic medicine -- serving both consumers and medical professionals. We will use our combined strengths and experience to build a market-leading aesthetic business that capitalizes on Johnson & Johnson’s broad-based commercial capabilities, worldwide surgical care footprint, and clinical scientific capabilities.”
About Johnson & Johnson
Caring for the world, one person at a time…inspires and unites the people of Johnson & Johnson. We embrace research and science - bringing innovative ideas, products and services to advance the health and well-being of people. Our 119,000 employees at more than 250 Johnson & Johnson companies work with partners in health care to touch the lives of over a billion people every day, throughout the world.
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| To: richardred who wrote (2284) | 7/17/2010 3:17:41 PM | | From: richardred | | | | Johnson & Johnson Steals Mentor Corp.: Who's Next?
8 comments | by: Daniel Jacome December 08, 2008
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Last Monday, Johnson & Johnson (JNJ) announced that it had agreed to acquire Mentor (MNT) for $1.07 billion or $31/share, a 92% premium to the prior day’s closing price. While this may sound like a whopping deal for MNT investors, the fact remains that JNJ stole Mentor and likely underpaid for the company. Mentor shares, already down 57% on the year, would have needed to be taken out at a 132% premium simply to match the price level at which they were trading not too long ago. While another 30-40% on top of JNJ's offer would be great for Mentor’s long term shareholder base, don’t expect it -- JNJ has a war chest of cash to outbid anyone, and at a time when elective procedures are off due to the current recession and raising cash is almost impossible, JNJ is destined to take the position of market leader on the cheap.
Let’s take a quick look at what JNJ bought and then we want to throw out two other names to think about as valuations come close to rock bottom among aesthetic stocks.
Mentor, the market leading maker of breast implants for reconstructive/aesthetic procedures, also develops PurTox, which is expected to launch by 2012 and aggressively compete with Allergan’s (AGN) prized Botox line. While Mentor had sound leadership in its field (50% US implant share and accelerated penetration into silicone breast implants, which are priced twice as high as their saline counterparts; estimates from Morningstar suggest Mentor could be doing $600 million in sales just from breast implants by 2015) and was converting 15% of its sales into free cash flow, the company lacked the distribution force JNJ will be bringing it. JNJ, which already has great relationships with dermatologists and plastic surgeons, will now be able to cross sell Mentor’s portfolio of dermal fillers and silicone implants to customers.
In 2008, the stock tanked as investors fretted over the fact that implant procedures are considered elective and un-reimbursable – with consumers shouldering large out of pocket expenses in a poor economy, volumes would nosedive – some of that happened, but not to the degree the street was modeling at their worst case. Longer term, the aging population – people over the age of 65 reflect 15% of the US population but one third of its medical costs – provides a secular tailwind for cosmetic products created by companies like Mentor, so it is safe to say that JNJ did its homework on this one.
We think Allergan and Medicis (MRX) may themselves be takeover targets.
Medicis markets dermal filler Restylane, which is the most widely used dermal filler (dermal filler works like Botox, except it targets the mouth instead of the eyes/forehead) in the US and brings in 33% of Medcis’ sales. Dermal fillers are popular among 50-65 year olds, which contrasts with the lower aged Botox market (35-50 years old): the filler market is expected to ramp up over the next 15 years as the population ages. Medicis is also a major player in the acne products space; Solodyn represents more than half of Medicis’ sales and this product recently won a patent dispute that protects the treatment from generic competition for another 2-3 years. Lastly, Medicis is working on its own Botox-like product, Reloxin.
Jonah Shacknai, who founded Medicis in 1988, may decide to sell the firm altogether rather than pass the baton to someone else since the company could arguably have a titanic problem on its hands over the next couple of years as the dermal filler market becomes increasingly competitive and MRX faces the risk of Reloxin launch delays and/or generic pressure on its franchise acne drug.
MRX currently converts 20% of its sales into free cash given the industry-wide model of heavy R&D commitments up front and low working capital requirements on the backend. While shares spiked last Tuesday on the patent dispute win, they’ve retreated a bit and now fetch less than 5x on an EV/EBITDA basis and remain down 50% on the year. While the company could lose 40% of its sales if its launches fail and Solodyn gets killed by generics in a few years, speculators thinking Shacknai cashes out before those problems even come close to manifesting may want to take a stab at the stock here and sit tight as the economy recovers.
Allergan, meanwhile, is Mentor’s top rival in the breast implant market (a market Allergan entered through its Inamed acquisition) and will likely see erosion in its Botox line (currently 30% of sales) once MNTs Puretox launches and JNJ refines the contours of what it hopes to offer plastic surgeons. However, its opthamology business is inarguably attractive given its double digit growth and reimbursable status (70% of AGN's product line is reimbursed by 3rd party or government payers) – the numbers of dry eye and glaucoma cases expected to surface in the next 2 decades as Baby Boomers enter their peak years bodes well for Allergan, obviously.
More importantly, Allergan’s broad portfolio of cosmetic surgery, eye care, and specialty pharmaceutical products could be a treasure trove for a mega cap pharmaceutical company looking to diversity itself away from the secular decline in patented drugs and equivalently troubling inability to innovate at the rate of smaller biotech companies. Allergan currently has Posurdex – for macular Edema – in early clinicals and a Botox application for migraines – in Phase 3 trials. Its Lap Band is a clear alternative to gastric bypass and compelling product here in the US, where 1 out of every 3 Americans is considered obese.
On an enterprise value basis, Allergan trades at 3.5x its cumulative trailing five year R&D spend. Pfizer (PFE), beleaguered as it is by its parched drug pipeline, could arguably make a run for Allergan, a combination that would immediately position the acquirer among the world’s leading ophthalmology companies and reprieve Pfizer investors who are worried sick about the 2011 Lipitor overhang. I am modeling somewhere around $2.50 in 09 Allergan EPS, which implies a 15x forward multiple – I think getting constructive in the mid 20s price level makes more sense than jamming yourself here at an above market multiple.
Bottom Line: Should the economy continue to worsen and Mentor face delays in its anti-wrinkle product launches, the possibility that JNJ overpaid for Mentor could prevail – that is a low probability event, in my view, and this deal will likely go down as one of JNJ’s shrewdest moves in its 120 year history. Investors looking to speculate on who else might get picked off should take a good hard look at Allergan and Medicis – I don’t think you’d be wasting your time here as these companies have already done all the heavy R&D lifting for their prospective suitors, currently generate attractive returns on capital, and throw off plenty of cash.
Disclosure: Author’s family owns PFE and JNJ.
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| To: richardred who wrote (2273) | 7/17/2010 3:25:03 PM | | From: richardred | | | | SHLM -Will they reconsider?
A. Schulman CEO to retire; company to consider sale
Published: Friday, November 16, 2007, 9:23 AM Updated: Saturday, November 17, 2007, 6:35 PM
Terry L. Haines, chief executive officer of Akron-based A. Schulman Inc. (Nasdaq: SHLM), will retire by March 1, ending a 42-year career with the producer of plastic resins and compounds.
The company also will begin exploring strategic alternatives that include a potential sale, accoarding to a statement issued Friday morning by the company and Barington Capital Group L.P., a New York-based hedge fund with a 9 percent ownership stake in A. Schulman.
Haines and the company have "identified a highly qualified candidate and are negotiating with that individual to assume the CEO position," the statement said.
"My entire adult life has been devoted to A. Schulman and its stockholders and I have enjoyed a wonderful relationship with our board of directors and the employees of our company," Haines said in the statement. "... I have rarely imagined life after A. Schulman, but it is the right time to begin that life."
Haines's departure comes as the company faced increasing pressure from Barington and another New York hedge fund to put the company up for sale. A. Schulman is a 2,500-employee company with 17 manufacturing facilities in North America and Europe. Its revenues for the fiscal year ended Aug. 31 were $1.8 billion.
Barington waged a fight last year and ended up earning a seat on the company's board for its CEO, James Mitarotonda. This year, Ramius Capital Corp. pledged to field a slate of four candidates for seats on A. Schulman's 12-member board at the company's Jan. 10 annual meeting. Ramius owns a little over 7 percent of the company.
Just recently, Barington sought a list of stockholders from the company along with records on how directors and executive officers were using corporate assets.
As part of the announcement of Haines' exit, the company also said it has reached an agreement with Barington on directors to be nominated at the annual meeting. The hedge fund will back the company's slate of directors at the annual meeting, including Haines and Mitarotonda, incumbent director James A. Karman and a nominee to be made by Barington.
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| To: richardred who wrote (2286) | 7/17/2010 3:47:04 PM | | From: richardred | | | | Global chemical mergers and acquisitions are making a comeback
Big money is back
03 June 2010 00:57 [Source: ICB]
A renewal in global chemical M&A activity is at hand. Which companies and assets are juicy targets?
CASH-RICH buyers are on the prowl, seeking growth through acquisitions. Strategic buyers with strong balance sheets are well positioned to make deals as financing is widely available for good credit. And private equity firms could become a force once again.
Global chemical industry mergers and acquisitions (M&A) are on the upswing, with signs of increased activity, according to Peter Young, president of US-based investment bank Young & Partners.
"There are clear signs of a revival in the M&A market, with a thawing of credit, stabilization of economies around the world, increasing buyer confidence, more realistic price expectations by sellers, a higher confidence in earnings and cash flow forecasts, and high cash balances," says Young in an interview with ICIS.
"We expect the M&A market to improve substantially in 2010 over 2009. Only a drop into another economic recession or a major hit to the financial system will prevent this improvement in M&A," he adds.
"There are clear signs of a revival in the M&A market"
Peter Young, president, Young & Partners
In the first quarter (Q1) of 2010, $4.5bn (€3.5bn) in chemical deals closed, versus just $300m in the same period a year ago period and $25.4bn for all of 2009, according to Young & Partners.
The largest and only deal over $1bn in size in Q1 was Japan-based Mitsubishi Chemical's $2.52bn acquisition of Mitsubishi Rayon, which closed in March.
More significantly, the number of completed deals over $25m in size rose to 15 in Q1 - a major increase over activity in 2009. In 2009, there were four deals completed in Q1, seven in Q2, eight in Q3 and seven in Q4.
And the backlog of announced deals yet to close totaled 12 transactions with a value of $19bn at the end of March, versus five deals with a value of $6.3bn at the end of 2009, according to Young & Partners.
"The M&A market is coming back significantly," says Chris Cerimele, director and head of chemicals at global investment bank Houlihan Lokey. "The capital markets are also active, with the high-yield financing market open and equity market healthy."
"Strategic buyers… are seeking ways to accelerate growth"
Frank Mitsch, analyst, BB&T Capital Markets
Private equity buyers remained on the sidelines in Q1 with only two deals completed versus four in all of 2010, according to Young & Partners. Financial buyer market share of the M&A market continued to be low, at 13% of the number of deals and 6% of the dollar value. This is down significantly from a range of between 20-25% of the number of deals for much of the period 2000-2007.
"However, there are clear signs of an increase in financial buyer transactions as debt financing availability continues to improve," says Young. "The financing market is improving, but still not that robust. Financial buyer activity will ease its way up."
In March, US private equity firm Bain Capital agreed to buy compatriot Dow Chemical's Styron business for $1.63bn.
Styron includes Dow's polycarbonate (PC), acrylonitrile butadiene styrene (ABS)/styrene acrylonitrile (SAN) resins, polystyrene (PS) and styrene monomer operations, as well as the company's stake in the Americas Styrenics joint venture (JV) with US major Chevron Phillips Chemical.
"The M&A market is coming back significantly"
Chris Cerimele, director, Houlihan Lokey
"Debt markets are improving and private equity players are itching to get deals done. For good deals, they are willing to stretch a bit," says Cerimele. "Also on the sell side, they are more willing to sell portfolio businesses, as the window for deals is open."
PENT-UP DEMAND
Many strategic buyers stayed on the sidelines in 2009 as the recession played out. But now, pent-up demand from cash-rich companies is poised to drive deals.
"Strategic buyers, armed with balance sheets flush with cash, are seeking ways to accelerate growth beyond their organic means," says Frank Mitsch, analyst at BB&T Capital Markets, also US. "With many players on the sidelines in 2009, we believe there is notable pent-up demand that is just waiting to be executed on in 2010."
"Proactive companies in the chemical sector that are willing to invest up-front time preparing for deals so that they can move quickly as opportunities become available will be able to effectively utilize M&A as a growth tool to reposition themselves," says Saverio Fato, global chemical leader for international consultancy PricewaterhouseCoopers.
The amount of cash on balance sheets of 15 US chemical companies under coverage by BB&T (excluding giants Dow and DuPont) reached a decade-high of $8.3bn in 2009 - 60% above 2008 levels.
"Big money is back," says Mitsch. "[US specialty chemical company] Solutia showed the most dramatic increase in cash levels, helped in part by the sale of [the nylon business]. [US compounder] PolyOne quintupled its cash balance, primarily through capital improvements, while Westlake [Chemical] and Huntsman [both US] nearly tripled their cash, reflecting commodity swings and legal settlements, respectively."
At the end of Q1, DuPont had $4.5bn in cash and marketable securities. It also had debt of $11bn, which is more-than manageable for the Standard & Poor's A-rated company. DuPont remains one of the best positioned chemical firms to make acquisitions.
Dow Chemical is still relatively leveraged following its $19bn acquisition of US specialty chemical company Rohm and Haas in April 2009. At the end of Q1, it had $2.9bn in cash and $23.2bn in debt.
With consolidation a key driver of M&A activity, firms in the fragmented markets of coatings and adhesives - such as US-based Valspar, RPM International and H.B. Fuller - could appear on radar screens of buyers, he notes.
In addition, companies emerging from bankruptcy, such as US-based Chemtura, W.R. Grace, Solutia, Tronox and Netherlands-based LyondellBasell Industries could be potential targets, along with companies with focused portfolios such as Arch Chemicals and Nalco (both global water treatment firms), the analyst adds.
Leveraged buyouts (LBOs), which disappeared in 2009, could also be making a comeback. "As earnings have elevated from the abysmal 2008 to early 2009 levels, private equity firms are increasingly able to justify valuation multiples," says Mitsch.
The analyst's top LBO candidate is US-based phosphates company Innophos. A buyout could be feasible at about twice the company's current price of less than $30 per share based on various cash flow metrics, he says. Other LBO candidates include PolyOne, says the analyst.
ON THE SELLING BLOCK
More chemical assets are hitting the selling block as companies view the M&A market as returning to healthy levels of activity with more robust valuations.
"Valuations may have hit trough levels in the fourth quarter of 2009," says Young.
Cerimele is seeing more sell-side pitches. "Companies are feeling like this is a good time to explore asset sales as the days of lowball offers and bargain basement deals are coming to an end," he says. "Plus, buyers are looking for deals more actively - both strategics and private equity firms."
In April, Eastman Chemical, announced it was "reviewing strategic options, including a potential divestiture" for its poyethylene terephthalate (PET) business. The US chemical firm has retained global bank Merrill Lynch as its financial adviser.
Potential buyers are private equity firms, notes a US banker source. "There isn't a long list of strategic buyers looking to buy a PET business." Eastman explored strategic options for its PET business in 1997, including a sale, and unsuccessfully planned to split it off as a separate publicly traded firm in 2001.
Swiss specialty chemical company Cognis is also reportedly in sales talks with Germany's BASF, and US-based Lubrizol, among others, notes Mitsch. In April, German media reported BASF was preparing a €3bn ($3.7bn) takeover bid for Cognis.
While the chemical M&A recovery is in full swing, a couple of "wild cards" could take the global economy and the M&A market off track, according to Young.
"Major defaults in commercial real estate and certain sovereign nations such as Greece and Dubai are likely," he says. "Plus, a key concern, even in the context of a global recovery, relates to how economies and financial systems handle the withdrawal of numerous stimulative and financial support programs."
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| To: richardred who wrote (2280) | 7/17/2010 3:57:29 PM | | From: richardred | | | | EU approves One Equity's takeover of Constantia Packaging
Ben Bold, packagingnews.co.uk, 22 June 2010
One Equity Partners' takeover of Austrian packaging firm Constantia Packaging has been given the regulatory green light by the European Union, eight months after the deal was announced.
One Equity, which makes private equity investments for JP Morgan Chase, has bought a majority stake (65.79%) in Constantia, as reported in Packaging News in October.
The European Commission said that the deal did not raise competition concerns. It said in a statement: "The portfolio of companies controlled by One Equity Partners and JP Morgan Chase are not active in the same markets and there are no significant vertical links with these companies."
Under the takeover agreement, Dutch holding company Constantia Packaging BV will retain a 25% stake in Constantia Packaging AG. It is One Equity's intention to acquire 75% of Constantia Packaging AG's shares.
Constantia Packaging AG operates in the aluminium, corrugated board and flexible packaging markets. It employs 7,600 people across Europe, Asia and the US.
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| To: richardred who wrote (1434) | 7/17/2010 4:01:54 PM | | From: richardred | | | | RTE and CPET packaging trends prompt Sonoco acquisition
By Rory Harrington, 02-Jul-2010
Related topics: Packaging
Sonoco said good forecasted growth in the US markets for CPET and multi-layer barrier polypropylene containers for ready-to-eat (RTE) frozen foods were two key factors that triggered its takeover of Associated Packaging Technologies (APT).
The South Carolina-based giant announced Wednesday its acquisition of APT, the largest manufacturer and supplier of crystallized polyethylene terepthalate (CPET) containers to the frozen food industry, for around US$120m from Castle Harlan, Inc. Sonoco said it expected the deal to yield some profits this year and predicted the asset would generate some $150m annual sales for the group.
Sonoco appears to be hoping to capitalise on projected growth in the US frozen food market, Demand is expected to reach $7bn by 2013 thanks to growing demand for convenience food and technical advances in packaging, according to a recent report from The Freedonia Group.
Expansion strategy
Sonoco spokesman Roger Schrum told FoodProductionDaily.com: “We are projecting CPET growth in North America to be in the 4 per cent range over the next several years. This growth, along with expected growth in multi-layer barrier polypropylene containers for retortable, shelf-stable, ready to eat food applications, were important factors in our decision to add APT to our existing thermoform container portfolio.”
APT is a major provider of dual-ovenable, food packaging serving the frozen food industry in North America, Europe and Australasia. It employs 400 workers and operates a total of four CPET thermoforming manufacturing facilities in Canada, the United States and Ireland. It has an annual CPET container capacity of three billion, as well as monolayer and multilayer barrier polypropylene container capabilities. The company is also a pioneer in the development of recycled PET (rPET) frozen food trays, said Sonoco.
Schrum added that the acquisition would speed up it own development of multilayer barrier polypropylene food containers thanks to APT’s "state of the art rotary thermoforming technology”.
foodproductiondaily.com
Sonoco buys Associated Packaging for $120 million
Sonoco pays $120 million for Associated Packaging, maker of frozen foods containers
ompanies:
C
On Wednesday June 30, 2010, 8:13 am EDT
HARTSVILLE, S.C. (AP) -- Packaging products maker Sonoco Products Co. said Wednesday it has completed its acquisition of Associated Packaging Technologies Inc., a company that provides frozen foods containers.
Sonoco said it paid $120 million in cash, including the costs of paying off various obligations of Associated Packaging, which had been majority owned by private equity firm Castle Harlan Inc.
Sonoco said Associated Packaging should add $150 million to its annual revenue, which amounted to $3.6 billion in 2009.
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| To: richardred who wrote (2256) | 7/17/2010 4:12:51 PM | | From: richardred | | | | Multi-Color to buy Italian label maker for $61.6 mln
Tue Jun 29, 2010 5:08pm EDT
* Deal to add to earnings immediately
* Strengthens presence in wine, spirit label market
* To gain entry to olive oil label market
June 29 (Reuters) - Consumer products label company Multi-Color Corp (LABL.O) said it would acquire Italy's Guidotti CentroStampa for 50.5 million euros ($61.60 million) in cash and stock, to enter the olive oil label market.
With the acquisition of the Italian wine, spirit and olive oil specialist Guidotti, Multi-Color expects to strengthen its presence in the wine and spirit label market and also gain reach into regions with over three quarters of the world's wine production.
Under the deal, 80 percent of the proceeds would be paid in the form of cash and 20 percent in the form of Multi-Color stock at an agreed-upon stock price, the company said in a statement.
The acquisition is expected to close on or about July 1 and is expected to add to earnings of Multi-Color immediately.
Shares of Micro-Color closed at $10.28 Tuesday on Nasdaq. (Reporting by Jennifer Robin Raj in Bangalore; Editing by Vyas Mohan)
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| To: richardred who wrote (2290) | 7/17/2010 4:39:45 PM | | From: richardred | | | | Saw Mill Capital Announces the Acquisition of Gateway Packaging
Company LLC
Briarcliff Manor, New York, June 22, 2010 – Saw Mill Capital Partners L.P., a private equity
investment fund managed by Saw Mill Capital LLC, together with the senior management team
of Gateway Packaging Company LLC, announced today the acquisition of Gateway Packaging,
a leading supplier of flexible packaging primarily serving the pet food and human food markets.
The terms of the transaction have not been disclosed.
“On behalf of our employees, we are excited to announce our financial and strategic partnership
with Saw Mill Capital”, commented Roger Miller, Gateway’s Founder and Chief Executive
Officer. “Saw Mill is a forward- looking, growth-oriented partner that brings not only capital but
also new strategic resources to accelerate our growth plans,” he added.
Timothy Nelson, a Principal at Saw Mill Capital, said, “Gateway is a strong platform led by a
visionary team that has built an excellent brand in the flexible packaging industry. This
business has been built from the ground up by a team committed to delivering superior value to
their customers. We look forward to continuing this and supporting their growth plans with our
financial and strategic resources.”
Saw Mill Capital LLC is a growth-oriented private equity firm seeking buyout investments in
manufacturing and service companies with enterprise values of $25 to $200 million and at least
$5 million of pro forma EBITDA. Saw Mill brings capital and unique resources to help
companies reach their full potential by working collaboratively with senior leadership to create
effective business strategies, implement best practices and provide global market expertise. In
partnership with senior leadership teams, Saw Mill seeks to consummate follow-on acquisitions
at its portfolio companies. To learn more about Saw Mill Capital, please visit
www.sawmillcapital.com or contact any of the firm members listed to the left.
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| From: richardred | 7/18/2010 12:20:01 PM | | | | | | Key statement>Some of these technologies could be acquired, specifically in the field of unmanned aerial vehicles, secured communications and defense electronics. Could they be talking about these companies? Rockwell Collins Inc(COL)--
AeroVironment, Inc. (AVAV)--Harris Corp. (HRS)
EADS is keen to make defense acquisitions in the U.S.
CEO Louis Gallois still believes in winning the controversial U.S. tanker deal
By Aude Lagorce, MarketWatch
LONDON (MarketWatch) -- European aerospace and defense giant EADS is keen to make "reasonable" acquisitions in the field of defense security and services in the U.S. over the next few years, Chief Executive Louis Gallois said over the weekend.
The U.S. has the largest defense budget in the world and EADS (EURONEXT:FR:EAD) has been trying for years to win a bigger share of that market. Defense electronics and services are among the fast-growing areas.
EADS could look at assets closer to home, in France for instance, but the tendency of the government to get involved has acted as a powerful deterrent.
"You have seen the success of discussions between French companies to exchange their assets," Gallois said at a press briefing on Saturday. He was alluding to the efforts of defense firms Safran and Thales to restructure their operations by swapping some units.
"We are not interested in a strategic move in France."
Airbus
The U.S., however, is a different matter and an altogether more tempting prospect.
"We want to be prime contractors there," said Marwan Lahoud, chief strategy officer at EADS. "In order to gain this status, you need to detain key technologies."
Some of these technologies could be acquired, specifically in the field of unmanned aerial vehicles, secured communications and defense electronics, though Lahoud stressed he doesn't favor "the string of pearl approach" of making a flurry of small acquisitions.
Deals are on the agenda these days at EADS for several reasons. First because the company has the cash to afford it, second because the global economy is starting to recover and last but not least because the board -- long hostile to deals -- has recently turned more amenable to the idea of making "reasonable" acquisitions.
Gallois still believes in winning the tanker bid
Making acquisitions, however, isn't the only path to success in the U.S.
The highest profile attempt by EADS to bolster its position across the Atlantic so far has been its dogged bid for the U.S. Air Force tanker contract, which has been the subject of much controversy.
EADS, which owns Airbus, and Boeing Co. (NYSE:BA) are locked in a fierce battle for the contract to supply 179 refueling planes to replace the aging U.S. fleet of Boeing-built KC-135 tankers.
Earlier this month both companies filed their latest proposal. A decision between EADS' bid, based on the A330 tanker, and Boeing's, built around the 767 commercial jet, is expected later this year.
Gallois this weekend said he was confident the decision would be "fair," adding that he was very satisfied with the treatment received from the Pentagon in the latest round of bidding.
"I think we have a fair chance to win, first because we are fairly treated by the Pentagon and second because a large part of our development costs and risk are behind us, as the plane is flying," he said.
He also emphasized that EADS needs the program to be profitable and would prefer to lose the contract rather than agree to a price that would make it loss-making.
marketwatch.com
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